Environmental Context and Organizational Aspiration Determination

Abstract

AbstractThis research develops an attention‐based, environment‐inclusive model of organizational aspiration determination. The behavioural view embraces that organizations determine aspirations based on three reference points: past aspiration, past performance, and social reference group performance. We build hypotheses to explain how environmental munificence, dynamism, and complexity shape organizational attention allocation among these three reference points. Using data on US publicly traded firms (2006–16), we find that organizations, when determining sales aspirations, allocate (1) more attention to past aspiration and social reference group performance but less attention to past performance in more munificent environments; (2) more attention to past performance and social reference group performance but less attention to past aspiration in more dynamic environments; and (3) more attention to past performance but less attention to past aspiration and social reference group performance in more complex environments. Overall, we contribute to aspiration research by explicitly theorizing a previously understudied contingency, using direct aspiration measures from a wide range of industries, and providing evidence that organizations’ attention allocation rules are regulated by the external environment when determining aspirations.